Economic Effects of Russia’s Trade Liberalization: Russia’s WTO Accession and FTAs with EU and Korea

Abstract

This paper estimates the economic impacts of the various liberalization scenarios of Russia (accession to the WTO, Russia-EU FTA, and Korea-Russia FTA) using GTAP recursive dynamic and capital accumulation models. To compare liberalization gains from goods liberalization with those from goods-and-services liberalization, the original GTAP database is adjusted by inputting Australian sectoral indices as barriers in the service trade. The major findings and implications of this paper are as follows. First, without simultaneous improvement of market institutions, Russia's liberalization gains from its accession to the WTO are not so great. Second, the inclusion of the services sector in addition to the goods sector in the WTO liberalization scenarios does not greatly expand Russia's economic benefits from trade. This is quite different from the case of China's accession to the WTO. Third, Russia's liberalization gains from the Russia-EU FTA are not so great, either. This result is in contrast to that of CEEC's accession to the EU, where the CEEC enjoys large gaThis paper estimates the economic impacts of the various liberalization scenarios of Russia (accession to the WTO, Russia-EU FTA, and Korea-Russia FTA) using GTAP recursive dynamic and capital accumulation models. To compare liberalization gains from goods liberalization with those from goods-and-services liberalization, the original GTAP database is adjusted by inputting Australian sectoral indices as barriers in the service trade. The major findings and implications of this paper are as follows. First, without simultaneous improvement of market institutions, Russia's liberalization gains from its accession to the WTO are not so great. Second, the inclusion of the services sector in addition to the goods sector in the WTO liberalization scenarios does not greatly expand Russia's economic benefits from trade. This is quite different from the case of China's accession to the WTO. Third, Russia's liberalization gains from the Russia-EU FTA are not so great, either. This result is in contrast to that of CEEC’s accession to the EU, where the CEEC enjoys large gains due to increases in FDI. Fourth, the economic effects of the Korea- Russia FTA on concerned countries are ignorable. Fifth, the sequencing issue regarding the Korea-Russia FTA, the FTA after Russia's WTO accession or the FTA before the accession, has no meaning. Sixth, the negative economic impacts, such as trade diversion effects, of Russia's liberalization policies on external regions are also ignorable.

Keywords

• Russia
• WTO
• FTA
• Trade Barriers in Services
• CGE